BUSINESS REVISION UNIT 3 Yasina Semy

MARKETING – 3.1.1

Marketing is the management process responsible for anticipating, identifying and satisfying customer needs and wants and to make a profit.

The marketing process involves market research to identify and understand customers which will allow the business to develop and test products or services. Then the business can communicate the product or service to the customer.

Marketing is important because it reduces the risk of product failure, helps understand customers, helps to communicate products to customers to make them want to buy them and to keep up to date with market trends so the business can continue to meet customer needs.

MARKET RESEARCH – 3.1.1 Market research is the process of gathering information about customers, competitors and market trends through primary and secondary research.

Primary research is data which doesn’t already exist and secondary research is data which has already been collected.

There are three stages of market research: 1.planning and designing, 2.doing the research and 3.analysing the research.

1. Planning and designing the research includes what the aims of the research are and what technique will be used.

2. Doing the research involves how long each research will take and how big the sample sizes will be.

3. Analysing the research involves looking for market trends and if comments are the same or different.

After analysing the research a business needs to think about if the market mix is appropriate, if products or services need to be changed to make it more appropriate for customer needs, if the product should stay the same and if the product or service needs to be withdrawn or replaced.

To know if the product or an idea is likely to be a success the right type of market research should be used and it should be accurate. The research should represent the market trend and no important information should me missed out.

MARKET SEGMENTATION – 3.1.1 Market segmentation is a group of customers with similar characteristics and needs. They can be segmented depending on the type of person.

Market segmentation helps a business to carry out market research, to target promotions to specific groups and tailor to customer needs.

PRODUCT TRIAL AND REPEAT PURCHASE – 3.1.2Product trial

Product trial is persuading customers to try a new product to gain awareness of its existence and gain feedback on its success.

The aim is to get customers through the door to try a product for the first time.

The methods used for product trial are viral marketing (Facebook), low trial products, free samples and public relations.

Repeat purchase

Repeat purchase is getting customers to buy a product more than once.

Loyal customers are customers who make repeat purchase which generates sales and revenue.

Loyal customers is also known as customer loyalty. Customer loyalty is the willingness of buyers to make repeat purchase of a product.

PRODUCT LIFE CYCLE -3.1.3 The product life cycle is the stages which a product goes through its life time.

Introduction phase- the product is launched into the market.

Growth phase – The launch is a success and sales are rising sharply and the product may make a profit v for the first time.

G Maturity phase – Sales are slow but loyal customers continue to buy and make repeat purchase. The v market becomes saturated as rivals bring out competing products.

C Decline/ Sale phase- The product is outdated and there is a big fall in sales. The product is withdrawn v or extension strategies are used.

Extension strategies are when a business slightly changes its product for a fresh appeal to the target c market or a new market segment. This increase the life of the product.

A combination or a range of products is known as a marketing mix. It helps a business to make c decisions like when to launch and when to withdraw a product, how to increase sales, to see what v products are doing bad and good and what products will be like in the future.

The net cash flow in the introduction phase is negative because there has no sales been made but there are still outflows.

The net cash flow is likely to be positive in the growth phases as there are sales but only a little more money will be coming in then going out.

In the maturity phase the net cash flow is positive as there are sales from repeat customers.

The business begins to see net cash problems in the decline phase.

BOSTON MATRIX - 3.1.3

The Boston Matrix is a technique used to analyse the product mix. Products are categorised into market shares and market growth.

Each category has symbol: Star, Cash cow, Problem Child and Dog.

The star is a very successful product but has to be funded to keep up with demand and the cash flow will have problems.

The cash cow has very little growth, but it is an established and profitable product.

The problem child presents a problem – Should the business continue to invest to increase sales.

The dog has very few prospect but should the business continue to sell it if it is profitable and can fund other products.

BRANDING AND DIFFERENTIATION – 3.1.4A brand/branding is a named product which is different from other products which consumers see as being different and can associate and identify with.

Product differentiation is making one product different to others by changing the design, formulation, function, name, packaging, customer service, quality or differentiating across the value chain.

Branded vs non-branded products

People are more willing to trial the brand range.

Brands encourage customer loyalty.

Brands can charge premium (high) prices.

Trusted brands leads to repeat purchase.

Customers have more awareness of brands.

Brands increase sale and market shares.

Non- branded products are very similar and not much differentiation.

Market mapping shows the difference between branded products and their positions for example the quality.

Product differentiation helps a business to: To gain an advantage over rivals when facing

competition. Position their products and target different market

segments.Customers feel that their needs are being meet.

MARKETING MIX – 4 PS - 3.1.5 A combination of factors which help a business to take into account customer needs when selling a product.

This involves the four Ps – Price, product, place and promotion.

Price – The amount of money needed to acquire a product.

Product – A product or service made by a business or organisation made available to customers for consumption.

Place – The way the product is distributed.

Promotion – The communication between the business and customer persuading them to buy.When differentiating products a business needs to think about: Who the product is targeted

to. What the product range is. What the packaging is. What the brand name is. What the formula (method)

is. What the unique selling

point is.

Price shows: Quality Demand of the product. How much it cost to

produce and promote it.Luxury brands charge premium prices and non-branded products and product trial charge low prices.

Reasons promotion: Boost sales Creates awareness Builds a strong brand

image Communicating products

benefits and features to customers.

.

Place – number of ways products are available: Direct- Some business sell direct and this

process is more accessible through the growth of internet sales. Businesses may employ sales forces to sell directly.

Retail – Distributing products through retailers helps a business sell its products by improving the customers buying experience and customer service.

Wholesale – Wholesalers break down bulk supply of products and distribute it to retailers. Wholesale is a sustainable method for businesses that produce large quantities of products.

DESIGN AND RESEARCH DEVELOPMENT – 3.2.1

The design mix is the range of variables which contribute to successful design: they are function, cost and appearance.To achieve this design mix the business has to carry out scientific research and development.

Function: How well a product works and the extent to which it does what it is supposed to do.

Cost: The cheaper the cost of producing an item, the better as this gives competitive advantage. It is closely linked to price. Businesses will try to keep costs low but improved functionality and appearance will increase costs.

Appearance: Stylish, elegant, beautiful products are more likely to sell and this is important for many products

Research and development Prototypes

The scientific research process:

It involves using scientific methods to develop new technologies, processes and materials for product invention and innovation.

Testing

Research new technologies, techniques and processes for the development of products.

A working model of a possible finished product that can be trialled and tested.

Testing for safety and durability and to collect market research information.

MANAGING STOCK-3.2.2

Managing stock is managing the materials that a business holds.

•Some could be materials waiting to be used in the production process.

•Work in progress

•Some could be finished stock waiting to be delivered by customers.

0 1 2 3 4 Weeks

Stock Level

1000

500

Minimum stock level

Maximum stock level

Re-order level

Bar gate stock

Maximum stock level- The highest amount of stock kept by a business.Re-order level – The amount of stock held by a business at which can order for new stock is placed with suppliers. The difference between this level and the point at which stock increases is the time it takes for the stock to arrive.Buffer-stock level/minimum stock level – The lowest amount of stock kept by a business. It is a safety net in case there is a surge in demand.

JUST IN TIME STOCK CONTROL AND JUST IN CASE – 3.2.2

Just in case involves having a backup of stock at all times.

Just in time (JIT) stock control is stock management system where stock is delivered only when it is needed by the product system, and so no stock is kept by a business.

For JIT to work a business must have good

relationships with suppliers, a well-

organised production system and regular

demand for their products.

A business can choose between using a “Just in case” stock control system or a “Just in time” stock control system.

BENEFITS OF HOLDING STOCK AND BENEFITS OF HOLDING LITTLE OR NO STOCK – 3.2.2

Limited problems.

A business can receive discounts for bulk buying.

Businesses can replace damaged goods.

Businesses can meet unpredicted surges in demand.

Cost saving is not having store stock.

Less chance of damaged or stolen products.

Employers can focus on tasks other than managing stock.

Can reduce costs of production which makes product pricing more competitive.

QUALITY - 3.2.3Quality is achieving a minimum standard for a product of service or a production process which meets customers’ needs.

To achieve good quality a business needs quality control and quality assurance.

Quality control: One part of the chain of production. A quality controller will examine and/or test for quality once a product has been made.Quality assurance: Ensuring that quality is produced and delivered at every stage of the production process which is often through making quality the responsibility of every worker. As a result there should be zero defects.

Quality assurance checklistFor a business to have a quality assurance system it must:

• Have quality as the focus of every process. • Involve customers and suppliers at the design stage.• Aim for zero defects.• Have quality as the responsibility of every employee.

• Have managers who ensure there are systems in place to assure quality .

• Meet quality standards like ISO 900.• Everyone aims for it and is involved.

Benefits of good quality: Good quality allows for premium prices to be charged. Good quality builds a strong brand image. Quality is closely liked to meeting customer needs. Quality is a way of differentiating a product.

Drawbacks of bad quality: No repeat purchase. Nobody will buy the product. Fall in sales. Increased costs.

PRODUCTIVITY – 3.2.4 Productivity: The output per worker. It measures how much each worker produces over a period of time.

Formula: Total Output / number of workers.

Benefit - Increasing productivity leads to greater competitiveness in a market.

How to improve productivity - By training, better equipment, more effective work practises, increasing output or by lowering costs of production (input) while maintaining output.

Importance of productivity:

If workers increase the amount they produce this v means no cost of production has changed and this will v lead to the cost per item produced to fall.

Methods of increasing output:

Motivate employees. Work overtime. Introduce more effective

work practices. Invest in better equipment. Train employees.

Methods of reducing costs:

Relocation. Streamline the production

process. Cutting overhead costs. Cheaper labour costs. Better design of products. Improved purchasing

(cheaper suppliers).

Competitive pricesCost-effective operations can help businesses to lower prices and be competitive against rivals.

Increased productivity Lower costs Lower prices Attract more customers Increased sales and profits.

EFFECTIVE CUSTOMER SERVICE - 3.2.5

Effective customer service checklist:

Meet and exceed needs of customers.

Provide high quality products and services.

Innovation (process of transforming inventions into products that can be sold to customers).

Spotting problems and potential problems.

Listen to customers.

Deal effectively and quickly with complaints.

Be on time.

Train staff in customer service.

Collaboration (enhance the service it offers customers by working effectively with other businesses).

Customer service: The experience that a customer gets when dealing with a business and the extent to which that experience meets and exceeds customer needs and expectation.

Advantages of good customer service:

Increased revenue Introduce new ideas Repeat purchase Attract better candidates Solve problems.

Drawbacks of poor customer service:

• Fall in repeat purchase and customer loyalty.• Fall in sales and profits. Sales changing to rival

products.• Inability to charge a premium price.• Poor brand image.• Poor customer satisfaction.• Unable to differentiate a product and gain a

competitive advantage.

Consumer protection laws – 3.2.6

Benefits of protection laws:

• Good publicity is followed.• Improved relationship with stakeholders.• Meeting consumer protection laws can

improve a businesses image.• A business that follows the law is less likely

to receive fines or be sued by customers.

The sale of goods act (Civil Law) Gives consumers right to compensation if a product that they buy is not of merchantable quality or not as described or not fit for purpose. It relates to the product or service being sold.

The trade description act (Criminal Law) Makes businesses liable for prosecution and fines if products are sold in a misleading way either false information, act aggressively or fail to give important information.

Drawbacks of consumer protection laws:

• Bad publicity is not followed.• Businesses have to comply with laws by

changing their products and practices and this can be costly.

• Laws can restrict businesses from operating as they would wish.

• Businesses must know the law and keep up to date.

Importance of cash: Cash is important because if a business’s outflows are greater than its inflows or the outflows occur at a faster rate then it could run out of cash and trading will cease. However a business can still be profitable if it runs out of cash.

Inflows Customers and supermarket chains who have bought its products.

Interest rates.

Outflows Wages Rent

Suppliers Taxes

Managing cash flow: The financial management is deliberately changing monetary variables such as cash flows to achieve financial objectives such as improved cash flow.

Cash flow is the flows of money in and out of a business.

Inflows Keep cash in the business outflow

Speed it up/ increase Slow it down/reduce

IMPROVING CASH FLOW - 3.3.1

Improving cash inflows:• Increasing sales revenue ( The

average price of products time the quantity sold).

• De-stocking (reduce the level of stocks in a business).

• Reduce credit terms with customers.

• Encourage customers to pay early (incentives).

• Use short-term sources of finance like overdrafts.

Improving cash outflows:

• Delay paying invoices.• Leasing rather than buying.• Reduce stock orders.• Improve credit terms with

suppliers.• Use cheaper suppliers.

Keyword:

Trade Credit: Good are not paid for at the time were brought. The buyer is given an agreed period of time in which to pay

for the goods.

Improving profit -3.3.2

Profit occurs when the revenue of a business is greater than its cost over a period of time.

Formula: Profit= Revenue – Cost

To improve profit a business can increase revenue or cut costs. The technique can affect the performance and in the long term reduce profit.

For example…

Increase prices The negative is that customers may buy the competitor's product.

Improve costs The negative is that there is expensive development costs.

Cutting investment The negative is that it damages long term competitiveness.

Cutting material costs The negative is that it lowers the quality of products.

Cutting labour costs The negative is that it lowers motivation of the workforce.

Increasing Revenue:

Total Revenue = Quantity Sold X Average price Total revenue is the revenue earned by a business

from the sale of a given quantity of products.

Revenues are the amount of money received from selling goods or services over a period of time.

Ways to increase revenue: Improve marketing, Better products, Increasing selling price.

The impact an increase in price has on revenue depends on how sensitive demand is to a change in price.

Cutting Cost:

Total Cost = Fixed Cost + Variable Costs Total cost are all the costs of a business. Fixed costs are costs which do not vary with the

amount produced such as rent, business rates, advertising costs, administration cost and salaries.

Variable cost are costs which change directly with the number of products made by a business like raw materials.

Ways to cut costs: Cutting marketing, Cutting costs of raw materials labour c or research and development costs.

BREAK- EVEN CHART – 3.3.3

Formulas

•Total revenue = Quantity sold x average price.

•Total cost = Fixed cost + variable cost.

•Contribution = Price – Variable cost

•Break-even = Fixed costs

•Margin of safety = Expected level of output – Break-even point.

•Break- Even level of output = Total fixed cost Fixed cost

A graph which shows total revenue and total costs, allowing the breakeven point to be drawn.

loss

Break-even point

Profit

Total revenue

Total costs

Fixed costs

Margin of safety

When total revenue is above the break-even point the business makes profit. Below it, it makes a loss.

Price – variable cost per item

ContributionSales revenue per item – Variable cost per item

MARGIN OF SAFETY - 3.3.3

It is the expected level of output take away break- even point.It is the amount of output between the actual level of output where profit is being made and the break-even level of output. This is how much production could fall before the business starts to make a loss. If the margin of safety is zero then production is at or below the break – even point.

BREAK-EVEN POINT – 3.3.3

The level of output where total revenues are equal to total costs; this

is where neither a profit or loss is being made.

BREAK-EVEN ANALYSIS -3.3.3

Useful tool to help a business make decisions and set targets and plan for the future. Helps answer “what if?” questions.For example: What would be the impact of an increase in variable costs on profit?

Any fall in fixed or variable costs is likely to lower the break-even point. An increase in price will also lower the number of units required to break-even.

The concept of break-even – 3.3.3

The break-even assumes that a business will sell all the products that it makes. In reality, if a business increases price it will lower the break-even point but this might deter customers from buying the more expensive product.

LOWERING THE BREAK- EVEN POINT -3.3.3

Break-even analysis can identify strategies for lowering the break-even point and increasing profit. If a business can do this without lowering productivity, quality or demand, they can successfully lower the break-even point.

USING BREAK-EVEN ANALYSIS – 3.3.3

Businesses use break-even when: Understanding the past (were the

decisions on price is correct?) Setting and achieving production

targets. Launching a new product. Starting a new business. Developing a business plan.

FINANCING GROWTH – 3.3.4

A business can use internal or external sources of funds to finance growth. Internal sources of finance:

Asset sales Selling assets the business owns such as buildings, equipment or land to raise finance.

Retained profit Profit which is kept back in the business and used to pay for investment in the business.

External sources of finance:

Bank loan Fixed sum of money borrowed from a bank at an agreed rate of interest.

Bonds A long term loan where typically interest is paid at regular intervals like a year and the loan is all required at the end of the life of the bond. Bonds are traded on stock markets.

Equity or share capital The monetary value of a business that belongs to the business’ owners. In a company, this would be the value of their shares.

Overdraft Borrowing money from a bank by drawing more money than it actually has in a current account. Interest is charged on the amount overdrawn.

Share A part ownership in a business, for example a shareholder owning 25% of the shares of a business owns a quarter of the business.

Trade credit Goods are not paid for at the time they were bought. The buyer is given an agreed period of time in which to pay for the goods.

Business

Internal sources

Owners funds

Retained profit

Assets sales

External sourcesOverdrafts

Loans

Bonds

Trade credit

Borrowing

Private limited companies (LTD)

Public limited companies (PLC)

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Financing a business is how a business obtains money and other financial resources to start up, expand and, if necessary, pay off any losses it has made.

There are two types of sources of finance:Internal Finance which is obtained within the business such as retained profit or the sale of assets.

External Finance which is obtained from outside of the business such as bank loans and cash from the issue of new shares.

Comparing sources of finance – 3.3.4Risk Selling shares may mean owners lose control or cash-flow problems may result from meeting loan-repayment terms.

Cost The cost of borrowing varies across different sources.

Availability Some sources such as loans or share capital might not be accessible.

Considering the sources of finance – 3.3.4

Are the sources of finance short or long term requirements?

How much finance is required?

If they borrow something how much will it cost (interest rate %)?

What sources are available to the business?

What level of debt can the business manage?

ORGANISATIONAL – 3.4.1 The way in which a business is structured for it to achieve its objectives. It is normally through a hierarchy which is a structure of different levels of authority in a business organisation one on top of the other.

Businesses can be organised in a number of ways:

- Product division

- Regional division

- Functional areas such as marketing or finance.

Centralise or decentralised:

Centralised A type of business organisation where decisions are made at the centre or core of the organisation and then passed down the chain of command. (Decision made by senior mangers normally at head office)

Decentralised A type of business where decision making is pushed down the hierarchy and away from the centre of the organisation.

Organisation charts:

A diagram which shows the internal structure of an organisation.

Chain of command (5)

Director

Line managers subordinates

Span of control (4)

Line managers can pass

on authority to their

subordinates through delegation.

Centralised Decentralised

Increased control and standardisation

Decisions developed to branches or divisions that may know their local customers better.

Decisions can be slow.

Loss of control.

HOW SIZE EFFECTS THE BUSINESS? – 3.4.1As businesses expand it will increase the chain of command and span of control. This can lead to drawbacks on: Communication, control and flexibility of a business.

A business can downsize or delayer to: Reduce costs improve efficiency and improve communication.

Keywords:• Authority The right to decide what

to do in a situation and take command of it to be able to make decisions without referring to anyone else.

• Chain of command Shows how orders and decisions are passed down throughout the organisation

from those in senior positions to workers in other parts of the organisation (from top to bottom).• Delayering Removing layers of management and workers

in a hierarchy so that there are fewer workers in the chain of command.

• Delegation Passing down of authority for work to another worker further down in the hierarchy of the organisation.

• Downsizing When a business employs fewer workers to produce the same amount through increases in productivity which can be achieved through delayering.

• Empowerment Giving more responsibility to workers further down the chain of command in a hierarchy.

• Function Organisation by function means that a business is organised according to tasks that have to be completed such as production or finance.

• Hierarchy Structure of different levels of authority in a business organisation on top of the other.

• Line manager Employee who is responsible for overseeing the work of others further down the hierarchy of an organisation.

• Span of control The number of people who report directly to another worker in an organisation.

• Subordinate Workers in the hierarchy who work under the control of a more senior worker.

MOTIVATION – 3.4.2

Maslow’s hierarchy of needs. Motivated by five needs. Placing the needs in order of importance, starting with the basic need.

The desire and willingness to complete a task.

A motivated workforce can lead to:

A hard-working and flexible workforce that is willing to “go the extra mile” for the business.

Greater commitment to the organisation.

Less time of with illness.

Improved customer service.

Improved communication within the business.

Self-actualisation

Self -esteem

Loving and belonging

Safety

Physiological

Creating job opportunities, promotion and training to allow employees to achieve their potential.

Creating promotion opportunities, empowering employees, using reward to recognise to achievements of employees.

Organising the workforce into teams, creating opportunities for employees to socialise.

Ensuring long-term progression and job security.

Providing a clean and safe working environment and well-paid jobs.

COMMUNICATION – 3.4.3 Messages passed between a sender and a receiver through a medium such as a letter or an email.

Communication has to be effective and in order for this to happen:

The sender has to choose an appropriate medium to reach the receiver.

Feedback should be available to ensure the communication has been successful.

Information should be accurate, complete, giving all information necessary, simple and clear so that the receiver can understand the information quickly and easily as possible.

Must take place at the right time and place.

Insufficient (less) or (excessive (more) communication has an impact on?

Employee motivation.

Customer service.

The number of mistakes made.

The understanding of employees.

Speed and implementation of decisions.

The image/brand of the business (through advertising).

There are barriers to effective communication and they involve:

Using inappropriate mediums or email system failure.

Being angry or tired.

Cultural differences.

The receivers might not be capable of understanding the message because they lack understanding of technical jargon.

TYPES OF COMMUNICATION – 3.4.3Formal channels of communication Channels of communication that are recognised and approved by the business and by employee representatives such as trade unions. It lays down rules of communication within the business.

Informal communication or communication through grapevine Workers chat and exchange gossip that are formally recognised by the business and can get in the way of effective communication.

Channel of communication The path taken by a message, such as horizontal communication or grapevine communication.

Horizontal communication Workers at the same level communicate formally like team problem solving.

Vertical communication Up and down the hierarchy for example like a manger may instruct a subordinate.

Feedback Response to a message by its receiver to the sender.

Internal communication Communication within the business/organisation.

External communication Communication between the business and an outside individual or organisation like customers, a supplier or a tax inspector.

REMUNERATION – 3.4.4

The payment system adopted by a business to pay and reward employees.Time – based systems

Salaries Results-based systems (suitable where output or success can be measured)

Fringe benefits.

Wages for part-time or full time workers.

For non-manual jobs.

Piece rates. Company car.

Overtime. For professional workers.

Commission. Healthcare.

Bonus schemes. Pension schemes.

Company discounts.

TYPES OF WORKERS – 3.4.4Different types of employees require different types of payment systems to ensure they are motivated and paid fairly.

Part time Employees who work only for a fraction of the working week.Full time Employees who work the whole of the working week.Freelance worker (self employed) Workers who tend to be self employed and do particular pieces of work for a business as a supplier.

Manual worker (Blue collar) Workers who do mainly physical work like an assembly line worker.

Non-manual worker (White collar) Workers who do non-physical work like an office worker or teacher.

Temporary worker Workers who have no permanent contract of employment with a business and so tend to work only for a short period of time for an employer.

PAYMENT – 3.4.4Choosing a payment system

The payment can be influenced by the nature of a job for example a piece-rate system might not fit a job of a secretary.

Cost A business will choose the most cost-effective option.

Motivation Pay is closely linked to motivation.

Flexibility A business might pay a one-off fee to a consultant so that they do not have to pay them over a long period.

Everyone is motivated in different ways for example a commission system will motivate sales staff to sell more. Choosing the right payment system will maximise the output of workers and the wrong system can waste money.

Payment methods

Wages Tend to be paid to manual workers for working a fixed number of hours per week plus overtime.

Overtime Time worked over and above the basic working week.

Basic pay Pay earned for working the basic working week.

Salary Pay, usually of non-manual workers, expressed as a yearly figure paid monthly.

Commission Payment systems usually operated for sales staff where their earnings are determined by how much they sell.

Bonus Addition to the basic wage or salary, for instance, for achieving a target.

Fringe benefits Payments in kind over and above the wage or salary, such as a company car.

ETHIC IN BUSINESS – 3.5.1

Pressure groups:

They are organisations that support causes such as workers rights, the environment, animal welfare and world poverty. They try to get businesses to change what they are doing and can cause bad publicity which causes or damage their reputation.

Pressure group activity:

Lobbying

Protests

Working with businesses

Refusing to work with businesses

Boycotting products.

Ideas about what is morally correct or not applied in a business situation on a range of issues from production to suppliers, workers customers, competitors, products, the environment and local communities.

Profit or ethics:

A trade-off is when something is given up in order to gain or achieve something else.

For example: Acting ethically can lower business profits. Paying higher wages, recycling and only using ethical suppliers is likely to raise costs and lower profits.

OR

Acting ethically can be appealing to customers and can motivate employees. This may lead to higher productivity and more sales which will balance cost of ethical policies.

ENVIRONMENTAL ISSUES – 3.5.2 Most business operations will have an impact on the environment in the short and long term. All businesses have to manage in order to achieve long-term success. The environmental impact of a business is closely linked to its growth. As business expand, the will normally have a bigger impact on the environment.

Short-term Long -term

Traffic congestion through transport and deliveries.

Climate change

Air, noise and water pollution through manufacturing and industry.

Depletion of land, food and natural resources.

Reducing the environmental impact:• Recycling• Use of renewable energy• Replenishment and conservation of natural resources.• Bio-degradable packaging.• Reduction in food miles.• Social enterprise.• Public transport.• Tax on emission.

Business opportunities:

As consumers are becoming more environmentally aware, there is an opportunity for business to differentiate their products to meet customer needs and make them “greener”. For example the development of hybrid cars. There are also growing opportunities of businesses in “green” industries, such as energy conservation and solar power.

Keyword:Supply chain The processes that are involved in the route taken by a product from the raw materials needed to create it right through to the final consumers.

ECONOMIC ISSUES AFFECTING INTERNATIONAL TRADE -3.5.3 Factor influencing trade-

• How developed each country is (including income, wages and the quality and technology of products)

• Government regulations on imports (including import protection, quotas and export subsides).

Developing countries are opportunities for UK businesses for example:

Lower costs of production in developing countries.

Products are cheaper when bought from abroad and then sold for more in the UK.

The import of cheap natural resources.

Increases demand for foreign markets as countries develop.

Developing countries may also be a threat to UK businesses for example if the UK buys cheap imports then the UK businesses may suffer.

There are also polices affecting international trade.

Governments can encourage international trade by supporting exports, or they can restrict imports in order to protect their home market. They can do this by… Tariffs and customs duties which tax imports and

make them more expensive. Quotas puts limits on the number of imports. An export subsidy will reduce the price of

exports and encourage exporting firms. Whether importing or exporting UK businesses

may suffer or benefit from these policies.

Keywords:

Developed countries Countries with a relatively high income per person for example UK and USA.

Developing countries Countries with a lower income per person than developed countries for example Ethiopia and China.

Export The sale of a good or service to a foreign buyer that leads to a flow of money into the UK. The foreign buyer will need to change their currency to complete the purchase.

Export Subsidies Measure that reduce the price of goods sold abroad.

Import The purchase of a good or service from a foreign business that leads to a flow of money out of the UK. The UK buyer will have to change the pound into the seller’s currency to make the transaction.

Quotas Limits on the physical number of goods that can be imported over a period of time.

THE GOVERNMENT AND EU – 3.5.4

Taxation: Taxation affects both businesses and consumer and are set by individual governments in the EU. They can reduce the amount that businesses and consumers have to spend and affect the way businesses and consumers behave.

The UK government and EU laws govern the way businesses in the UK operate, trade and deal with customers. Government intervention aims to encourage competition, help businesses run efficiently and protect consumers and employees.

EU Regulations:

Accounting regulations

The Trade Descriptions Act

Health and Safety laws.

Minimum wage.

Maternity and paternity rights.Taking measures to avoid government

intervention:

Moving to a country like Ireland where corporation tax is lower.

Producing products in countries with a lower minimum wage.

Selling products in countries with relaxed health and safety laws.

Consumers Businesses

Consumers spend more.

Profits and dividends rise.

Consumers spend less

Profits and dividends fall

Taxes High

Taxes Low

Government Taxation include:

• Value Added Tax ( VAT)

• Corporation Tax

• Income Tax

• National Insurance (NI)

REGULATIONS – 3.5.4 Regulations are sometimes called “red tape” and are designed to protect different stakeholder groups in a business. They cover every aspect of a business such as financial accounts, vehicle insurance, quality of products, waste disposal and location of offices and factories.

Different regulations have benefits and drawbacks for business. The short- term impact of government regulation on businesses to increase costs. In the long-term it should make them more competitive and ethical.

Regulations

Definitions Benefits Drawbacks

Minimum wage

The lowest payment per hour, day, week that can be given to a worker for their work.

Small businesses are able to compete with big businesses who might force down wage rates.

Higher costs of labour will reduce profits.

Maternity/ paternity leave

A period of approved absence for the purpose of giving birth or your partner giving birth.

Better relationships with employees and work-life balance.

Working days lost while employee is on maternity/paternity leave.

Health and safety regulations

The minimum standards for the working environment like how long without a break, storage of dangerous chemicals, level of heating etc.

Fewer work – related accidents and injuries.

Costs of health and safety regulations can hinder productivity.

Keywords:

Protectionist policies Measures designed to reduce foreign products coming into a country but give an advantages to domestic firms to sell products at home or export products.

Tariffs or customs duties Taxes put on goods imported into a county which makes them more expensive for buyers.